InsiderOnline Blog: October 2012

No, contrary to the claims of the Obama camp—repeated by the President in Wednesday night’s debate—Mitt Romney’s plan to make Medicare into a premium support program will not cost seniors an extra $6,400 per year. A premium support plan would give each senior a defined-contribution toward purchasing a health insurance plan of his choice. Romney says the contribution levels will be designed to ensure seniors have at least the same level of coverage they currently enjoy.

The claim that Romney’s plan would cost seniors more is based on a Congressional Budget Office estimate of a 2011 premium support plan put forward by Romney’s running mate Paul Ryan. That plan hasn’t been Ryan’s plan since earlier this year, and it was never Romney’s plan.

Further, as Rea Hedermann explains, CBO’s own scoring rules prevent the agency from producing reliable estimates of the effects of competition on program costs. In scoring the original Ryan proposal, for example, CBO assumed that traditional Medicare will always be less expensive than private plans in low-cost areas. But that assumption doesn’t jive with recent research, notes Hedermann: “University of Minnesota economists have found that premium support with competitive bidding could save 9.5 percent annually. A more recent study found that premium support could reduce Medicare spending by 9 percent annually.” [Internal citations omitted.] [The Heritage Foundation, September 28]